iPhone seen as still too expensive, losing steam in fall

A new report warns that halving the iPhone's price this summer still wasn't enough to truly grow sales — and that recent metrics may show an actual shrink in sales during the early fall.

Morgan Stanley analyst Katy Huberty points to a study of prospective iPhone buyers that shows about 46 percent of them believing the handset to be too expensive, even at its $199 entry point.

Few actually object to the phone itself; only 11 percent disliked either the design or the feature set, the researcher says. About 31 percent objected to the iPhone's continued exclusivity with AT&T, which prevents subscribers to Verizon or other carriers from switching without added costs.

Huberty also takes care to dismantle notions that the resistance necessarily has its roots in preconceptions of Apple, noting that only 15 percent of the same overall group thinks Macs are overpriced.

The percentage of those showing very strong interest in buying an iPhone has also dropped significantly over time. Where as many as 7 percent of would-be buyers were very interested in the phone in February 2007 — four months before the original phone and many of its final details were released — 5 percent now show that same level of interest today.

Regardless of Apple's own beliefs as to the truth of those objections, it may have to use price as leverage to spur sales, the analyst warns. According to Huberty, sales were half as strong during September and October versus the height of the iPhone's launch in July and September. The exact methodology used to collect this information isn't known, but the data is used to lower estimates for Apple's 2009 iPhone shipments from 19 million down to 14 million.

To spike sales, Huberty suggests that Apple should take a cue from recent rumors and halve the price to $100, which she believes could at least double iPhone sales numbers. Apple's prized profit margins likely wouldn't be an issue, she claims, as the company only needs to reduce the cost of manufacturing and selling an iPhone by 17 percent to achieve the intended effect.

While other reports have also been cautious on Apple's iPhone sales performance for the fall, recent analysis has also suggested that the numbers may be deceptive as the company passes through the holiday season. Kaufman Bros.' Shaw Wu has just noted that gift cards may be factors in any seemingly disappointing sales during the fall quarter, as Apple may record the immediate revenue from an iPhone 3G gift card but can't register the buyer as an iPhone customer until the recipient picks up and activates the handset.

As many as one million actual iPhone buyers may go "missing" as a result, Wu says.

Ms Huberty has a pretty awful record at forecasting Apple unit sales and profits. Why doesn't AppleInsider mention her record? Why is AppleInsider giving space to an analyst who has proven time and time again her incompetence?

Ms Huberty has a pretty awful record at forecasting Apple unit sales and profits. Why doesn't AppleInsider mention her record? Why is AppleInsider giving space to an analyst who has proven time and time again her incompetence?

Slow news day?... I agree, analysts should not be given a free pass on their opinions. Their opinion, plus crediting them on AI can equal damage to AAPL stock and reputation.

These analysts have a track record, and they should be called on it, but every bloody time I take AI to task for assuming a journalistic stance but still not quite getting it, I get a note from Kaspar taking umbrage at my comments.

Kaspar, why did you not bother to take an editorial role here and include this analyst's track record as a point of reference to their unfounded comments? I'm honestly interested in what the thinking is here...

Who is the person making the decisions to post stories on AI? That person should be taking a responsible editorial role. I don't think anyone expects "Wall Street Journal" level reporting, but clearly there needs to be an editor assigned... I'd vote for Mel Gross.

And, by the way if you don't want a data plan, you're not a target customer anyway???
In case you haven't noticed that's what the iphone is about?
it's certainly not about talk only?
Try a couple of tin cans and a roll of string

What a shock sales might have slowed a bit during the worst recession since the Great Depression. Not to mention that the fall often has people looking at other puchases or saving for the post Thanks Giving buying orgy.

More over the price of an IPhone is very reasonable. Certainly it could be better but that is true of all hardware. What makes IPhone expensive is the AT&T contract which makes one feel like the have been forceably bent over and abused. The way I see it is that AT&T could do better by $15 a month and still make good money.

In any event I still have a lot of people taking interest in my IPhone. Many looking towards future purchases.